Conventional wisdom says private equity firms hold their investments for between three and five years. However, analysis of the largest leveraged buyouts since 2004 shows private equity firms have flipped just over a third of them in shorter periods.

But the near-perfect exit conditions for the buyout industry over the past few years could be about to change and force a longer holding period, according to Jeremy Coller, chief executive of private equity group Coller Capital.

Financial News analysed the 50 largest US leveraged buyouts since 2004 using data from Dealogic, a research firm. Nine companies returned to the public markets and the private equity backers tried to float another two but were forced to cancel the listings.

Of the 10 largest deals in the sample, three companies had gone public, one filed for an initial public offering and another tried to float but cancelled the deal. The biggest acquisition was the $4.1bn (€3.2bn) purchase of PanAmSat, a US satellite operator, by private equity groups Carlyle, Kohlberg Kravis Roberts and Providence Equity Partners in 2004.

Madison Dearborn also tried to list Boise Cascade, in the second-largest transaction in the sample, in 2005. The Chicago-based private equity firm acquired the paper and wood business from Boise Cascade Corporation, now an office supplier called OfficeMax, for $3.7bn in October 2004.

In 2005 Apollo merged Borden Chemical with two other chemical companies in its portfolio and it was renamed Hexion.

Hexion planned to go public in 2005 but the deal was postponed after Hurricane Katrina.
Thomas H Lee Partners floated Refco but was estimated to have faced losses of $800m when the US commodities broker filed for bankruptcy a few months later.

The buyout firm acquired the company for $2.2bn in 2004 and when the broker went public a year later, its investment had doubled. When Phillip Bennett, former chief executive of Refco, disclosed he had hidden $430m of debt from the company, it was forced to file for bankruptcy protection and was delisted from the New York Stock Exchange.

Thomas H Lee Partners hopes its flotation of Nortek will be more successful – it bought the heating and air conditioning company for $1.75bn in 2004.

NTK, parent of Nortek, filed a registration statement for an IPO last May via Goldman Sachs and Credit Suisse Securities as joint global co-ordinators, and Banc of America Securities and UBS as book-running managers. The net proceeds will be used to repay debt and deliver a $175m dividend to the private equity backers.

The new owners filed for an IPO 20 days later via Morgan Stanley and Citigroup, and the company made its stock market debut in December that year. The IPO allowed the private equity owners to receive a dividend of $350m from their equity investment of $200m four months earlier.

The majority of exits, two thirds, were through IPOs, with the rest divided between trade sales and sales to private equity firms. In one case, two companies acquired by private firms in 2004 decided to merge.

AMC Entertainment, a cinema operator, was purchased by a buyout consortium in December 2004 for $2.1bn and rival Loews Cineplex Entertainment was bought by a separate private equity consortium in July 2004 for $1.5bn.

AMC and Loews announced a merger in 2005 and last month Marquee Holdings, the parent of AMC, registered for an IPO.